Wage Theft Epidemic: Bosses Pocket 15 Percent of Workers’ Pay

By Jake Blumgart

Marco Jacal and Isidro Suarez (members of Make The Road) were fed up with their employer, the owner of Veranda, an upscale nightclub and restaurant in Manhattan’s West Village. The two men worked as bar backs and busboys, but weren’t paid an hourly wage–instead they were forced to survive on tips handed off by waitresses after their shifts ended.

“We were very angry and upset, because one, two months turned into five months only paid in tips,” Suarez says. But the two men are also immigrants and were unsure of their rights.

When a new manager declared he would act as middleman for their tips, Jacal and Suarez’s “pay” began to shrivel. The waitresses told them how much they had been left, but the numbers didn’t add up. The manager was stealing part of their tips while the owner stole all of their wages. That was too much.

Jacal and Suarez approached Make the Road New York, an advocacy group for immigrant (and usually low-wage) workers, to help them win back their unpaid wages, unaware that a law had recently been passed to address this very problem. Legal procedures were soon opened against the company.

When the owner of Veranda learned of the suit he demanded all his employees’ working papers, a thinly veiled threat. He targeted Jacal and Suarez specifically, as known whistleblowers, reducing their hours, scheduling them during the Monday-Tuesday deadzone, and finally, firing them.

The workers, with the aid of advocates, were able to turn to Attorney General Eric Schneiderman’s office to prosecute their case under New York state’s new Wage Theft Prevention Act. Veranda ended up paying $150,000 in restitution and back pay to 23 workers. Under a provision of the new law, Jacal and Suarez were each paid $25,000 in lost wages, damages, and to punish their employer for firing them. Both men used their victory to help train members of Make the Road and to educate friends, families and acquaintances about the new law. Veranda now pays workers with checks, instead of cash under the table, and the state attorney general’s office will continue to monitor the restaurant’s employment practices through 2014.

Jacal’s and Suarez’s story is both commonplace and exceptional. Wage theft is a pervasive and often unacknowledged crime in our radically unequal society. Recently CNN reported a 400-percent increase in wage-and-hour violation claims over the last 11 years, a statistic that likely only scratches the surface of unreported wage thefts. While property theft is punishable with jail time, the National Employment Law Center (NELP) estimated (in 2008) that the average low-wage worker loses 15 percent of her annual income to wage theft, through underpayment and denied overtime, among other schemes. Many do not have the support of groups like Make the Road, or in other parts of the country, laws that prioritize such crimes.

NELP’s analysis of the nation’s three largest cities—New York, Los Angeles and Chicago—found that over one-fourth of low-wage workers weren’t being paid the minimum wage, while 76 percent weren’t compensated for overtime work. There is no reason to think conditions are better elsewhere. Across the nation, millions are forced to work off-the-clock, misclassified as “independent contractors” to avoid taxes (which the workers then have to pay themselves), their paychecks tampered with, their time sheets altered. Walmart is an example of a national company that has indulged in almost all of these practices.

Enabled by staggering power differentials between employers and workers, these practices have become the norm in many low-wage industries (in 2000 the Department of Labor found 100 percent of poultry companies were in violation of wage and hour laws). In the absence of a strong labor movement and robust federal and state departments of labor, low-wage workers are left to fend for themselves in a weak job market. Immigrants who lack proper documentation are particularly susceptible to thieving bosses, who often threaten to turn their employees over to the police if they complain.